9 RERA guidelines to know before buying a property in India

Earlier, the unregulated nature of the Indian real estate sector caused severe hardships and inconveniences to homebuyers. To put an end to their misery and boost real estate investments in the country, the Indian government passed the Real Estate (Regulation and Development) Act in 2016, which came into effect on May 1, 2017.

The Act laid the foundation for the Real Estate Regulatory Authority or RERA, which governs the functioning of the country's real estate segment.

Here are some RERA guidelines that every homebuyer in India must know:

1. RERA registration

   RERA registration aims to boost the country's law-compliant and transparent real estate projects. Before inviting people to invest in or buy the property, residential builders must mandatorily register themselves with their respective state RERA in two cases:

   • If the total land area is more than 500 square meters
   • If there will be more than eight apartments in all phases combined

   The Act also prohibits unregistered builders and developers from advertising their properties.

   Buyers can visit their state's online RERA portal to look for RERA-approved projects. For instance, buyers in Maharashtra can look up the MahaRera website. This check is important to avoid any legal or financial issues in the future.

2. Carpet area

   Simply put, the carpet area is the total area that can be covered with a carpet. However, the lack of clarity or guidelines on the inclusion of areas in the carpet area resulted in higher and unfair property prices for buyers. To avoid this, RERA guidelines defined the carpet area as the net usable floor area, excluding the space occupied by external walls and areas beneath service shafts, exclusive balconies or veranda areas, and exclusive open terrace areas. This ensures that developers adhere to a standard definition of carpet area while pricing the property.

3. Advance payment

   RERA guidelines prohibit developers and buyers to ask or pay more than 10% of the total property cost as advance payment, i.e., before signing the Builder Buyer Agreement (BBA). Moreover, the amount must be paid only after the execution of the sale agreement, which again has a standard format under RERA to avoid any ambiguity or fraud.

4. Escrow deposit

   To protect the financial interests of buyers, RERA mandated developers to transfer 70% of the amount collected from buyers to an escrow account, a secure third-party account that temporarily holds funds until the first and second parties complete a transaction. The money can be withdrawn from the account only after authorisation certificates from the associated architect, engineer and chartered account have been furnished. These withdrawals are also subject to half-yearly audits.

5. Approval for changes

   The sanctioned plan of a building helps all parties know the property well. This includes various plans such as site, building, and landscape plans. It also includes structural plans and permissions approved by competent authorities. If the builder intends to make modifications to the sanctioned plan, it can only be done after getting written consent from at least two-thirds of the home allottees.

6. Project delivery

   Prior to the introduction of RERA, delayed completion and handover of possession were common scenarios in the Indian real estate landscape. However, now, this would mean penalties for the developer in the form of interest payments to the buyer until the possession is given to them. Buyers also have the right to claim a refund of the amount paid and terminate the contract. In this case, too, buyers are entitled to interest payments.

7. Right to information

   In addition to the right to timely delivery of the project and to claim refunds, buyers have the right to know all the essential details related to the property, including the sanctioned plan details, layouts and site plans, stage-wise completion schedule, quarterly progress updates, etc. Moreover, they are also entitled to receive all the relevant documents concerning the property after receiving possession.

8. Defect liabilities

   Given their deadly nature, building defects demand immediate actions from developers. According to RERA guidelines, if the constructed property demonstrates any structural or workmanship defect within five years of possession, the developer must rectify it while bearing all the costs incurred. If the issues are not fixed within 30 days of intimation, then the buyer is entitled to compensation that will be decided by the respective state RERA.

9. Grievance redressal

   RERA mandated all states to set up an Appellate Tribunal to address the complaints and concerns of buyers. Buyers can lodge an online or offline complaint against the developer for reasons such as delayed possession, changes in the property plan without obtaining necessary consent, providing false or misleading information, etc. The redressal must be made within 60 days of filing the complaint.

   The introduction of RERA was a welcome move by the Indian government, which continues to largely service Indian homebuyers in terms of cost, convenience and time.

   However, a good knowledge of RERA guidelines is important to seek maximum benefits.